THE EUROPEAN Union provisionally approved German lender Hypo Real Estate’s transfer of about €200 billion of risky assets to a “bad bank” while questioning if the lender can survive.
Hypo Real Estate required more than €100 billion in German government assistance and had to be nationalised last year by Berlin, which saw the lender as crucial to the stability of the country’s covered bond market. Its problems related in part to the inability of its Dublin-based Depfa subsidiary to access credit markets.
That aid prompted an investigation by the European Commission to see if it complies with EU rules.
EU competition commissioner Joaquín Almunia reserved judgment about the assistance and the bank’s restructuring plan but let the transfer of risky assets go ahead.
“The huge transfer of impaired assets to a ‘bad bank’ and the additional state guarantees should contribute once and for all to stabilising Hypo Real Estate,” Mr Almunia said in a statement yesterday. “At this stage I still have doubts about the long-term viability of HRE.”
The EU said it would take the transfer of about €200 billion of toxic and non-strategic assets, plus up to €40 billion of extra state guarantees, into account in its ongoing investigation.
